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What Is Bad Faith Insurance? – Morgan & Morgan

Bad faith insurance describes an insurer’s effort to get out of its obligations to policyholders. For example, an insurer may refuse to pay a settlement or unreasonably drag out the process of investigating a claim. 

We understand that an insurance company’s refusal to settle a claim can put you in a difficult financial position. If you paid into your policy month after month, year after year, an insurer should honor their side of the deal and offer a fair and prompt payout. 

Our experienced and tenacious insurance attorneys can help if you are having trouble getting the payout you deserve. We can determine whether you have a viable bad faith claim and help you move forward with legal action. You could recover damages in addition to the original value of your claim. Contact us today and find out now how we could help. 

What Counts as “Bad Faith”? 

If you are currently in a dispute with an insurance company, you might wonder what bad faith insurance is. Similarly to other types of contracts, insurance contracts imply good faith and fair dealing between the parties. Therefore, an insurance company must pay out valid claims promptly. Bad faith arises when an insurer denies, undervalues, or delays a legitimate claim.

When Should I Speak to a Lawyer?

Unfortunately, many insurance companies are primarily focused on their profits rather than providing their policyholders with the payouts they deserve. Therefore, bad faith claims can be fairly common. Some companies will deny most claims in the first instance, hoping that policyholders give in and walk away. However, if your insurer is treating you unfairly and resists paying a legitimate claim, it is time to get an experienced bad faith insurance lawyer on your side. Seeking legal advice can be crucial when an insurer:

  • Fails to investigate a claim adequately 
  • Did not adequately explain policy exclusions before purchase
  • Makes a lowball settlement offer
  • Uses fraudulent business practices
  • Delays your claim without offering an explanation
  • Denies your claim without justification
  • Does not respond to your attempts to communicate
  • Does not accept your proof of loss

There can be various other ways in which an insurer could act in bad faith, such as charging higher premiums after you filed a claim, or wrongfully cancelling your policy, among others. If you faithfully paid your insurance policy and the insurer is not upholding their end of the deal, you should seek legal advice. Speaking to a bad faith insurance attorney can help you learn about your rights and the next best steps.

Do Denied Claims Always Involve Bad Faith?

It is important to understand what bad faith insurance is. Not every delayed or denied claim automatically qualifies for a bad faith case. The denial of your claim could be legitimate, for example, when your type of damage or loss was excluded under the policy. 

Likewise, a delay in claims processing could be warranted if you failed to offer comprehensive proof for your loss or an insurance adjuster disputes the value of the losses and in other circumstances. 

What Does Not Constitute Bad Faith?

Simple and honest mistakes by an insurance company generally do not constitute grounds for a bad faith claim. The same is true when an adjuster calculates a different loss amount than the claimant, provided the insurance adjuster can show evidence supporting their figures. Knowing why your claim was denied and whether the insurer did so in good or bad faith can be challenging. However, our experienced attorneys can help to clarify your legal options. 

You Can Fight Bad Faith Insurance

Unfortunately, bad faith insurance is not a rarity. Some unscrupulous insurance companies bank on claimants not knowing their rights. However, policyholders can fight back. You could have the option of filing a lawsuit against an insurance company for breach of contract or bad faith, depending on your specific case. 

Before considering legal avenues, however, try to first work with the insurance company to come to a solution. Ensure to keep all relevant documents, including emails, evidence of your losses, and other relevant material, to demonstrate your willingness to work with the insurance company. If your insurer doesn’t budge, it may be time to speak to a lawyer and consider filing a lawsuit.

Filing a Complaint with the Relevant Department of Insurance

Since bad faith insurance is typically a state law matter, you could file a complaint with your state’s department of insurance. Services vary from one state to another, but most departments of insurance will try to help resolve your complaint with mediation.

Filing a Bad Faith Insurance Lawsuit

Once you have exhausted all other options for recovering a fair settlement for your claim, your last resort is turning to the law. Filing a bad faith insurance lawsuit can be a daunting and overwhelming task. You will have to gather the relevant evidence and stand up to a powerful insurance company with lawyers experienced in fighting bad faith cases. However, a seasoned bad faith insurance lawyer at Morgan & Morgan can level the playing field and fight the insurance company on your behalf.

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